“After being stuck inside for months, people are more intimately aware of the inadequacies of their homes than ever before. Across every consumer category, people want homes with more space…”
Robert Reffkin, CEO of Compass
The Bay Area is a resilient market and bounced back early into the pandemic. Nearly any real estate data chart will show the pandemic plunge and quick recovery that surpasses 2019 numbers for Single Family Home sales in the late Summer through the Fall and Winter.
The condominium market has remained soft as people are seeking private homes rather than high-density living.
- The economy is expected to continue improving
- Interest rates are projected to remain low
- Future home sales are forecasted to grow
Houses show a steady (steep) incline from April 2020 to November 2020
Houses shot up well above 2018–2019 numbers and remained high.
Here Are 5 Tips to Win in the Hot, Hot, Hot Bay Area Market.
1. Work With a Local (Full-time) Agent
A local agent is someone who is actively servicing and who has a track record of closing deals in the area where you’re looking to purchase a home. It will be difficult for an LA agent (or even a Sacramento agent) to service a buyer in the Bay Area. Even though they are both licensed in California, the markets are vastly different to provide accurate expertise and advice on the local market nuances.
There are no fees to work with a buyer’s agent. That’s right, it’s free! The seller pays the listing agent a commission fee to sell the home. The listing agent splits the commission with the buyer’s agent. For example, a listing agent may have a 6% commission fee and split 3% with the buyer’s agent.
The pandemic has brought a pause to public open houses for the foreseeable future. All property home tours are by private appointment only and accompanied by an agent.
2. Get Acquainted W/ the Home-buying Process First
When you travel to a new city, state, or country… Do you: A go there blindly? or B do your research and find recommendations on places to visit? I would say B is the answer for most.
The average person will purchase up to 3 homes in their lifetime. The contracts, laws, and other local nuances are constantly changing. Meeting with a local agent to walk you through the home-buying process will give you a roadmap towards getting your new home and give you the opportunity to see if the local agent is a good fit for you.
3. Get Pre-approved Early
A loan pre-approval or proof of funds statement or letter (for cash buyers) is a pre-requisite to writing an offer. Most sellers will not look at an offer without verification that you are able to purchase the property. Following COVID guidelines, sellers may request to see a pre-approval before confirming a home tour.
In addition to having an agent, a pre-approval will be your ticket to entry to tour homes.
A pre-approval is like having a plane ticket. You need a plane ticket to enter an airport and to board a flight just like you need a pre-approval to shop for homes and to write offers. Without a pre-approval, you are essentially just window shopping.
Throughout the pandemic and to reduce exposure at the properties, sellers have the option to allow only qualified buyers into their homes. This means prospective buyers might be asked to provide a pre-approval or verification of ability to purchase (proof of funds for cash offers) before a home tour is accommodated.
Due to the historically low rates, many banks or lenders are backed-up with refi applications. Starting the process early will get your loan application in line for review before you find the right home.
The pre-approval process can take on average 1–3 days depending on the file and how quickly you provide your documents to the lender. If you’re waiting until you find the right home before getting pre-approved, you will likely be too late and miss your opportunity to make a competitive offer.
4. Tour Homes and Review the Comps/sales Variance
“Time kills deals”
Many Single Family Homes are selling within 5–10 days with multiple offers. Touring and reviewing homes quickly will ensure you don’t miss out on an opportunity.
Another benefit to having a local agent is having personal inside access to just listed, coming soon, and off-market properties. The sooner you can tour properties of interest, the sooner you can line up your favorites to tee-off!
Have a meeting with your agent to gather an understanding of the comparable home sales and the variance of the listing price and the selling price. This will help you tremendously! It's a numbers game and if there is a comp to support it then someone will probably offer it.
For example, in the Sunset District of San Francisco, it's the norm to have a listing price approximately 20% below the market value. It's just a listing price or "marketing price" to get prospective buyers through the door. This strategy maximizes the interest of the home to receive multiple offers and sell 20-25% above the listing price.
Note: It's not 20% above market value. It's 20% above the listing price which was already skewed 20% below the market value. It's a numbers game!
For every property that you tour, all visitors (including your agent) will be required to sign a famous PEAD form. This is the Property Entry Advisory and Declaration with information on touring and entering a home during the coronavirus pandemic. Current guidelines allow for two people from the same household + one agent inside the property at one time.
5. Have Thick Skin
The Bay Area is one of the world’s most competitive real estate markets. Properties receive multiple offers. Sometimes it’s 5–7 offers and sometimes it’s 10–15 offers. In the end, only one person or party gets the home. Some people get lucky with their first offer, but for the rest, it takes a few offers before one sticks.
It’s essential to have thick skin and to stick with it. Your first one might not get it, but your second, third, or fourth might!
Jay-Z said it best “On To The Next One”.
Moving is more than just an investment, it’s a step towards a better life. In the Bay Area, time in the market has proven to out-perform timing the market. Those who purchased in 2008–2012 had no idea the market would increase at the rate it did.
Your first home purchase might not be your “forever home”, but in five to seven years the ROI might enable you to trade-up into that next home, or that forever home.